FTC Proposes Amendments to the Mail Order Rule

The Federal Trade Commission (FTC) has proposed several new amendments to the Mail and Telephone Order Rule, which would impact shipment and refund requirements for direct response marketers that accept orders either via the Internet or the telephone. The proposed changes are largely driven by changes in technology that have materially changed the way consumers interact with merchants.

The Mail and Telephone Order Rule essentially requires that marketers ship products within the time period promised in any advertising or on the website, or, if no time period is specified, within 30 days. The rule also specifies the timing and methods by which consumers must be notified of shipping delays, and the process and timing for issuing refunds.

The most significant change proposed by the new rules is the expansion of the rule to cover all Internet sales regardless of how the consumer accesses the Internet. Under the current rule, Internet sales were technically only covered if the consumer accessed the Internet by means of a dial-up or modem device. With the advent of broadband and wireless services, the FTC felt the need to expressly expand the rule to apply to all Internet sales irrespective of how the consumer accesses the Internet.

There was little resistance from the industry to this change. Accordingly, under the proposed rule, all sales made via the Internet will be subject to all of the provisions of the Mail Order Rule. This is particularly significant to DR marketers because, often, rapid shipping promises are a part of the sales or marketing pitch. Marketers must remember that if particular shipping commitments are made and then cannot be honored, notices in specified formats must be provided to the consumer and the consumer must be offered the opportunity to cancel. In addition, if there are extended or continued shipping delays, the order must be automatically canceled unless the consumer consents to the delay.

A second change concerns the method by which refunds or refund notices can be made available to consumers. The current rule requires that refunds and refund notices be sent via first-class mail. The proposed rule would permit refunds and refund notices to be sent by any manner that is at least as fast and as reliable as first-class mail. Thus, for example, refunds could be made via electronic funds transfer, and refund notices could be sent via courier or E-mail.

A third change relates the manner in which refunds must be provided. Specifically, the Rule would require that seller provide refunds by check, cash or money order when buyers use a method of payment other than a credit card.

While none of these changes impose requirements that are likely to be onerous or difficult for sellers to comply with, historically rule revisions are typically followed by enforcement actions designed to serve as a reminder to the industry. Marketers should review their shipping and cancellation procedures to ensure that they have proper systems in place to comply with the rule changes.

Marketers should also be reminded that so called “dry tests,” in which offers are made with no bona fide intention to fulfill, could be deemed a violation of these rule changes, unless that fact is made clear to the consumer in the offering materials.